Offshore Wind Projects Could Provide Refreshing Energy Source

Residents along the Atlantic coastline recently witnessed the wrath of Hurricane Sandy. Now they may begin to feel something a bit more breezy -- the beginnings of a new offshore wind energy project that is spearheaded in part by Google.

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The Atlantic Wind Connection would take place over at least 10 years and would have the potential of delivering 7,000 megawatts of wind energy to states along the East Coast, some of which have set renewable portfolio standards. That would increase the venture's attraction despite being considerably more expensive than on-land generation.

“The Atlantic Wind Connection provides a significant alternative to land-based upgrades to the grid,” says John Nathman, a retired naval officer before the Federal Energy Regulatory Commission. “Indeed, the project can be an important step in strengthening our national security through improvements to the electric grid.” The venture’s partners are not just Google but also Trans-Elect, Good Energies, Marubeni Corp., Bregal Energy and Elia, which are moving ahead. They have combined to invest $5 billion.

The Department of Interior’s Bureau of Ocean Energy Management granted its permission to build the underwater line that could eventually stretch 380 miles from Virginia to New Jersey. The agency’s review concludes that no other similar competitors exist in that region that would object to giving the developers rights-of-way. Other federal and state permits are still necessary.

The project, of course, can’t avoid the comparisons to Cape Wind, which has been encumbered in legal battles for more than a decade but which may start producing power in 2014. The Atlantic wind deal has broader public and political support.

Still, the cost of the project could end up being enormous, or potentially twice as much as a land-based deal. The investors, though, are factoring in potential subsidies and tax benefits as well as tougher environmental regulations dealing with carbon emissions.

Under the National Offshore Wind Strategy, the U.S. Department of Energy wants to have 10,000 megawatts of offshore wind generating capacity by 2020 and 54,000 by 2030. Those scenarios include development in both federal and state offshore areas, including along Atlantic, Pacific and Gulf coasts as well as in Great Lakes and Hawaiian waters, the agency says.

While the regulatory headwinds that are keeping offshore wind production at bay are easing, the bigger gusts involve getting the financing needed to go ahead, as well as to conquering some of the technical hurdles. That’s why the U.S. Department of Energy is working to remove some of the barriers to entry by funding some of the research and development.

The best known among the offshore wind proposals is that of Cape Wind, which got approval to operate in 2010 after nine years of regulatory battles. The power facility, which would operate off the coast of Massachusetts and deliver electricity to the residents of Nantucket Sound, must still resolve some legal issues.

The deal has been helped along by the courts, which have recently upheld a power purchase agreement it had with National Grid to buy half of the power that it would generate. That makes financing the project more feasible. If it comes to fruition, it would generate 468 megawatts, providing most of the power there. And while the project has jumped through every regulatory hoop, environmental opponents of the wind farm have filed multiple lawsuits to try and stop it.

Why are Google and company so confident about the approval process while the Cape Wind project has languished for years? Cape Wind, designed to offset fossil fuel usage in the area, would be located in waters where the politically powerful surround. The proposed super-grid in the Mid-Atlantic is enjoying broad public support from the politicos and its would-be patrons.

That's because the Atlantic has shallow waters relative to most other potential off-shore sites, meaning the wind mills could be located far enough away so as not to be an eye-sore. At the same time, the four on-land connection points are much less hassle than the number that would be required if a 350-mile transmission system was built on land.

Still, the cost of the project is said to be about 50 percent more than if the generation was land-based. The investors, though, are factoring in potential subsidies and tax benefits as well as tougher environmental regulations dealing with carbon emissions. Once built, meanwhile, the transmission system would get federally-regulated rates of return.

A Pike Research analysis indicates that offshore wind has high associated costs. The price of such generation is greater than that of onshore wind, adding that in some cases it is two to three times more.

NRG, for example, won’t go forth with its wind deal off the Delaware coast until it can find dependable investment partner. Meantime, Spanish wind developer Gamesa is suspending its plans to build off the Virginia coastline, citing the need for financing at a time of political uncertainty. It had wanted to build a small prototype but will now wait a few years.

The challenges surrounding offshore wind are enormous. To get there, costs must come down and technologies must improve, which would make it easier to attract capital. But if it can be cost-effectively achieved and subsequently replicated, the projects would provide a refreshing new source of power to residents along the East Coast, and elsewhere.